Mr. Higgins I propose at this time to give you a
picture of the territory that these particular acts
[2]
refer to, and with which the second part of our
report deals. As you realise, in the introduction to
the railway bill by Mr. Hugessen of Quebec,
[3] he
gave a picture of that area. With your permission
I was going to ask our own senator from Labrador
who was in that area, who was over Grand Falls
and into the mines, if he would give us an account
of the area as he knows it, and any other comments he would care to give us, so we
would be
in a better position to understand it.
Mr. Burry ....There are one or two comments I
would like to make before giving that word picture. With the rest of the Committee,
I took a
serious view of the change that was made from
10 cents per ton royalty to 5% of the net income.
We thought with 10 cents royalty we would certainly get a considerable amount. We
found they
changed to 5% of net profits, and there are so
many suspicions of how big companies have a
way of manipulating their profits to avoid taxes.
We thought the 5% of the net profits they would
declare would not give us much revenue.
April 1947 NATIONAL CONVENTION 509
Going further into it, I am personally, I do not
speak for the Committee, not taking such a
gloomy view of what we are going to get out of
the operation in Labrador as I was inclined to at
the beginning. I believe that this company, with
all the money they are going to invest, will be
declaring big profits in the interest of the
shareholders. and seeing that we are going to get
5% of the profits as a royalty, and 35% income
tax — 40% of the profits they declare — I think
we are going to get something substantial out of
it. That will be cold cash.
There are some people —I have found them
in my conversations around the city — who think
because we have this great iron deposit and
water-power, the revenue accruing will be sufficient perhaps to take care of the running
expenses
of this country.... If we think in terms like that,
we are going to be disappointed....
There is another point we have not touched on
very much, the profit that will come to Newfoundland and Labrador as a result of the
labour
that it will give to our people. We have had
figures given to us as to the number who will be
employed on that operation, and it is considerable. Ican visualise men and families
going from
all areas of Newfoundland, and from the coast of
Labrador and setting up their future homes, and
that will be a tremendous help to Newfoundland.
Some people think, "We are fishermen! How
can this country expect fishermen to carry on a
mining operation?" To offset that, I would point
out that in St. Lawrence we have a mine, and
Mr. Poynter told us that when they went there 12
years ago, the men around there were fishermen
and knew very little about mining, and now, 12
years hence, they have very fine miners, equal to
any in the world.
As far as the people in Labrador are concerned, we have a small population on the
coast.
These people suffer intensely from lack of funds.
This mine is in Labrador. We want to see those
people benefit — uproot themselves from the
coast and go into the interior of Labrador, and
become miners and if anyone is in doubt that the
Labradorians are not capable of making good
miners, they can get that out of their minds. I have
been associated with them for 15 years, and I
know they are capable of hard work and of adapting themselves.
When Goose airport started, people from the
fishing settlements along the coast came to the
airport to work, and helped to build the airport;
and the superintendent there told me they brought
a great contribution to the airport. The young
chap in charge of all the electrical repair work is
a Labradorrian, as is the man in charge of the
oil-heating apparatus.... The people along the
coast will bring a great contribution to the mine,
and I hope our government will help these people
move from a place where they cannot make a
decent living, to a place where they can start
again in life. I would not want to take them from
the fishery if they could make a living, but they
have not been able to do it in the past. It might
help the fishery if the men now associated with
the industry who cannot make a living were taken
where they could make a living, and newer blood
brought in for the fishery.
I have lived in that area 15 years, in the same
latitude, same temperatures, same summer, same
winter, I know the climate and conditions they
would have to live under. I think the climate and
the conditions under which they would have to
live are very conducive to a happy, healthy, comfortable era. When the air base started,
men from
northern Ontario came to Goose Bay to work, and
I visited the base on a good many occasions, and
the first question they would ask was, "When are
we going to get our winter? You do not have low
temperatures. This is nothing compared with
northern Ontario. We are certain you must have
more severe winter." They found out for themselves that conditions are not more severe
than the
northern part of Ontario. What is true of Goose
Bay is true where the Labrador Mining and Exploration Company is going to operate
this iron
ore deposit.
I have never missed an opportunity oftrying
to point out the atmospheric conditions and living
conditions, and how they are not to be looked
upon as adverse; people moving into the area will
find a good climate, and will be able to grow their
own vegetables and live under similar conditions
to northern Newfoundland and northern
Canada....
I think it is important that Newfoundlanders
and Labradorians should take advantage of this
mining operation, and anything the government
can do to get our people, who are not making a
comfortable living, to move in there, will add to
what Newfoundland is going to get out of it. As
510 NATIONAL CONVENTION April 1947
well as getting cold cash, one of the greatest
advantages is the employment it will provide and
the revenues that will come; various expenditures
will be made in Newfoundland territory, and the
taxes will come to the government....
Mr. Penney Will the Labrador Mining and Exploration Company agreement be open for discussion
at this time?
Mr. Higgins What I propose is to have the
Quebec act
[1] read and explained, and then compare that act with our act. It is better to reserve
comment until we give you full information.
[The Quebec act was read by the Assistant Secretary]
Mr. Higgins Mr. Secretary, we will stop at that
point. I would like you to refer to the sections
which we have read. You will be able to follow
our comments easier. Get the 1938 act, and the
1944 act, and I will give you the cements, and
you can check them yourselves.... You will note
from paragraph 1 of the Quebec act the Hollinger
North Shore Co. has 3,900 square miles altogether. The Hollinger North Shore is a
company similar in personnel to the Labrador
Exploration Co. Our concession area is 28,000
square miles. Paragraph 2 provides that they have
rights, in that 3,900 miles, from the date of issue
until 1952, with arenewal period of two consecutive periods of five years each, making
something
roughly like 16 years of a free concession area. it
is not free, because, as you will note from paragraph 3 of that act, during all that
time they must
pay, beginning with $10,000 at the date of issue
of the concessions, and $6,000 each year during
the period of the concession. Now this area began
in 1936 for 20,000 square miles, and continues
up to 1953, and there is no payment of any kind
during that time. The only obligation of the company is to do work up to $50,000 per
year during
that time. Now both acts provide that the company must pay the cost of survey, boundaries,
etc., in other words thoroughly prospecting and
surveying the area, and in both acts they have to
supply the governments, both ours and the
Quebec government, with all information.
In Newfoundland the company and its
predecessors have control of 20,000 square miles
from 1936 until 1953. They are paying $50,000
per year, at least they are spending $50,000 per
year for work, but that is the only amount that
they are obligated to spend. Now I say, on the
basis of the land they got from Quebec and on the
basis of the land they got from Newfoundland,
we should have been paid, at the date of the issue
of the concession, the sum of $50,000, because,
as you will note, the area is roughly five times as
great as the area of the Quebec concession. Ours
is 20,000 miles, theirs is 3,900 miles. For each
year they had this concession they should have
paid us $50,000. Now they get, after a period, a
regular mining license. It is true, and I must point
out to you in all fairness, that after 1952 the
company will get the area that they require up to
2,000 square miles, and at that time they are
obligated to pay 5 cents per acre for 2,000 square
miles.... My memory of the act is that they have
the privilege of acquiring 2,000 square miles for
a ten year licence. At any time within that ten
years they have the privilege of picking 1,000
square miles from the 2,000 square miles, and for
the 1,000 square miles they pick they are entitled
to get a 40 year further additional period of time
for 5 cents per acre. In other words ifthey so wish
they could tie up for 50 years 1,000 square miles
of Labrador, which I presume would be the best
Labrador ore section, for 5 cents per acre, for 50
years. Now they would have to pay for that
$64,000 per year if they took the whole 1,000
square miles. At the end of that time, or at any
time during it, they have the right to apply for a
mine lease. If they take out a mine lease they have
the right for 90 years to export and exploit the
mine in Labrador on the concession area. For that
1,000 square miles they pay a royalty, or a rental
rather, of 50 cents per acre, so that if they took up
the full area of the concession, they would have
payed $320,000 per year in the way of rental.
If they operate it and, under the act, have to
pay a royalty to the government, they could
deduct the amount of royalty that they would
have to pay from that $320,000, if the royalty was
not greater than the rental. in other words, if the
royalty did not amount to $320,000 they could
deduct whatever amount they had to pay from the
$320,000. If the royalty amounted to $320,000 or
more no rental had to be paid by them. Is that
clear?
Mr. Higgins [don't know — that's the act. Now
April 1947 NATIONAL CONVENTION 511
paragraph 5 of that Quebec act provides that
before the first of May in each year all such
reports (that is of their work) must be given to the
minister, as well as a certified account by the
auditors of the amounts actually spent. Paragraph
6 provides that the company must in the calender
year 1946 spend $25,000, and during the calender
years 1947 — 1951, $39,000
Mr. Higgins That compares with our $50,000
for 20,000 square miles. Paragraph 7 provides
that the company can only acquire 300
square miles. In Newfoundland they can get up
to 1,000 square miles. You will note in paragraph
7 of that act it says definitely that they are
definitely obliged to mine on or before January
1, 1958, and if they don't mine on or before
January 1, 1958, their licence to mine may be
cancelled at the option of the government, and
that proviso also applies if they fail to comply
with putting in their claim. We have no such
proviso. The country could be tied up for 50 years
for $64,000 a year, and a mining license or lease
could be acquired up to 8 square miles. Paragraph
10 provides that they have the right, during the
period of ten years from the coming into force of
the Quebec act to have a strip of land 10 miles in
width contiguous to the area reserved for them.
That is really one thing that they don't have to
pay anything for.... Paragraph 11 gives the right
for the period of 60 years for the concession. As
I said before, our act provides that they may have
a non-mining licence period at 5 cents per acre
for 50 years, and a lease period for 90 years. They
have 60 years. We gave them, for 5 cents an acre
50 years, and 90 years at 50 cents an acre.
Sub-paragraph C of paragraph 1 l: "The Company shall pay to the Government of the
Province
... $100,000." That is altogether apart from any
rental or anything else, but, as I must point out to
you again, if the company operating in Newfoundland-Labrador acquires the whole area
under a mining lease they are obligated to pay
$320,000. If they don't make $320,000 per year
by the way of net profit, or at least royalty on net
profit, whatever they make they can deduct from
that $320,000. And they are not obligated to take
that amount. They can take any part of it, or tie
the whole thing up for 50 years.
Paragraph 12 provides that if there is an interruption in the shipments of ore in
Quebec, if they
don't ship for two years, they may have their
licence cancelled. That's another little thought.
Paragraph 14 provides for payment out of the
annual profit resulting from the area.... I want to
make a few comments then on the thoughts which
are shown in that act....
[Mr. Higgins continued to compare in detail the Quebec and Newfoundland legislation,
focusing on deductions allowable from gross profits before the calculation of royalty]
Mr. Chairman I would like to point out that this
is an act of some 24 pages, drawn up presumably
by lawyers, meant to cover the legal rights and
immunities anticipated by the company or necessary in their operations, and that we.
as a Convention of this character, cannot possibly go through
all the details of legal interpretation in' the course
of an aftemoon's debate. If we are going to go
into it in that fashion I will have to suggest that
we adjourn this debate and study it a little more.
Mr. Job I agree with you. I think we are wasting
a lot of time.
Mr. Higgins All right, but you will note that
there are several deductions that we have in our
act that do not apply at all to Quebec. I will draw
your attention to these....
In other words our corporation tax on that
company is deducted from the royalty. In the
Quebec act it is not deducted.
Mr. Smallwood Paid to any local authority,
municipal council is it?
Mr. Higgins Well, if they had a council down
there as well.
Mr. Higgins You have a list of duty deductions
in that act. I have to point out that with respect to
customs duties that may not be such an important
detail in Quebec, as most of the articles they use
would be Canadian manufacture, but there would
probably be some articles that they could not get
in Canada and would have to import. If they pay
any duty here it is deducted.
Mr. Chairman Looks like the royalty will be
based on net profits as well.
Mr. Higgins Definitely, and it looks like net
profits will not be very great. Before you go into
the discussion of the matter we can give you
further details from our minutes. and the act is
open now for your discussion at this point if you
so wish, and I will answer any questions I can on
512 NATIONAL CONVENTION April 1947
it.
Mr. Butt I was wondering if we need go so far
in discussing this matter, if we could not get the
basic principles to tie in closely with our terms of
reference. As I see it, some years ago we had
some territory on the Labrador which was, at that
time, worthless. As the world market developed
we began to realise that we had some potential
wealth; later, as the market developed further,
that there was a possibility there of real wealth.
Now, if we had had the experience, and financial
resources, and the political climate, it is just
possible that we might have been able to take our
potential wealth and develop it solely for our own
benefit, and the profit would stay entirely in
Newfoundland; but we have neither the experience, the financial resources, nor the
political
climate, that is the whole thing. Therefore we say
to outside capital, "You have found this potential
wealth, if you will come in and spend a couple of
hundred million dollars, dig out the hole and turn
it into real wealth, the people of this country will
get value in the form of wages, the government
of this country will take from the company a
certain percentage of its profits, which in this case
turns out to be 40%." I am certainly not a competent person to discuss matters arising
out of this
law. For example, I have the temerity to question
the principle of royalties altogether, but who am
I? It seems to me that we can't expect to get any
more than we are getting, and for our purpose it
ought to be enough for us to know that we are
going to get real wealth in the form of wages, and
that we are going to get from the company a
definite percentage of its profits. But we can add
something to this, because shares are sold to
Newfoundlanders, so that we can share further in
the profits which this company may make.
The main thing from my point of view is that
the Labrador mine is going to be developed. In
the long run it does not make any difference to
me whether you tax the companies coming in to
do business or not. The main thing is that the hole
is there in the ground. We say, "Come and get it
out. Pay our people good wages, and give us a
fair share of the profit, which may average over,
or about 50-50." It seems to me as simple as that,
and that we ought not to go probing too far into
the technical details....
Mr. Penney I would like to say something about
the agreement as it affects the future of Newfoundland. I would not attempt to go
through the
maze of documents in connection with this mining matter. It would take a Philadelphia
lawyer to
unravel it all. I would like again to take up this
agreement in the hope that something may be
done to change it before it is forever too late. In
doing so, may I ask you to pierce through the
maze of expert legal phraseology and see in this
amazing document two of the factors that will
materially affect the economy of Newfoundland
and its people for all time. No doubt there are
other important factors hiding behind the profuse
array of facts and figures, but that I prefer to leave
to the good judgement and discernment of the
other delegates.
Two key factors I wish to stress now are the
Grand Falls
[1] water-power potential, and the 5%
royalty on net profits. The former is, to my mind,
tied up literally for a song. The other is a joke if
it were not so tremendously important; for 5% net
profits, as you all know, can be smothered out so
completely as to leave Newfoundland with nothing for its mineral excepting labour....
Apparently
that iron ore should be figured in cents for
promoters rather than in dollars for poor old
Newfoundland, and in regard to this I say that
clause in the agreement should be changed to
provide a straight royalty of so much per ton for
the ore exported.
In regard to that key asset in the great Grand
Falls water potential, you will have noticed in the
correspondence between one of the wealthy
promoters and our Newfoundland representative,
that there is prospective water-power available in
Quebec that could be used instead of the Grand
Falls water-power, which in itself, to put it mildly, is a subtle argument, yet so
plain that I am sure
delegates will not fail to take note; for if that is
so, we may be quite sure that it cannot be obtained
at a give-away price, for Mr. Duplessis and his
associates in Quebec will see to that, and I may
add Labrador also, if it can be gotten so cheap and
easy.
I hope I have said enough to impress you with
the urgency of impressing upon our present trustees the necessity of having this agreement
changed, so that Newfoundland and its people
shall obtain at least a fair return from its vast
mineral deposits in Labrador before it is forever
April 1947
NATIONAL CONVENTION 513
too late. Let us then, all together, send out a
warning from this assembly that will reverberate
through Newfoundland and Labrador against this
agreement, for it seems to me to be cloaked in
sheep's clothing, yet it is in reality a wolf....
Mr. Smallwood When it was brought out by the
Mining Committee that a very important change
had been made in the taxation that Newfoundland
would get out of this mining company, a change
from the 1938 act of 10 cents a ton on every ton
of ore that company has exported from Labrador,
to the 1944 act, which cut out the 10 cents a ton
and puts in its place 5% of the profits, I must
admit that I shared the feeling Mr. Penney has
just expressed. I too was disgusted with it, and I
so expressed myself on Friday last. Since then I
have been reading the 1938 act and the 1944 act
and also the Quebec act, and whatever other
information I could get, and today I say frankly,
though I may be mistaken, I am not nearly as
disturbed as l was two or three days ago.
We know, the Mining Committee tells us, that
the great and wealthy iron mine of Lake Superior,
the Mesabi Run I think it is called,
[1] is coming to
its end; another seven or eight or ten years, just
about the time it will take to get this Labrador
mine going, is about how long this great iron
mine will still last in the United States. Now, to
the steel mills of the United States, that is a very
serious situation, Along comes this Timmins out-
fit of Canada. Some years ago they got the right
to explore Labrador — 20,000 miles of it — and
to stake out 1,000 miles of it some day to develop
the iron ore. That was some years ago. We had
the 1938 act and the 1944 act, but along comes
Quebec, just this year, was it not?
Mr. Higgins Last year, but they were in there
since 1942.
Mr. Smallwood Yes, but it's only last year they
passed this act. We are told there are two mines,
one on the Newfoundland side of the boundary,
and the other on the Canadian side, but to all
intents and purposes it is one mine, separated by
a purely artificial, though legal boundary, and
they have not even found out yet where it lies.
They claim that they have got to develop on both
sides of the boundary to make it profitable, and
to do that they have got to spend one quarter of a
billion dollars, of which about half would be
spent in Newfoundland-Labrador and the other
half in Quebec-Labrador — New Quebec I
believe they call it.
They say Mr. Timmins is a very wealthy man,
and that the men he has associated with him are
very wealthy men also, but nobody supposes for
one single minute that Mr. Timmins and his
friends are going to find out of their own pockets
one quarter of a billion dollars to develop this
great iron mine, which means that they have got
to sell shares on the money markets. No doubt
here in Newfoundland there will be hundreds of
people buying shares in that great corporation. In
Canada and the United States there will be
thousands. It will be a great corporation with
possibly tens of thousands of shareholders.
Would any of us, assuming that we had money,
buy those shares if we were not completely satisfied that they were a good buy, that
we were
going to make a profit, and that we were going to
get dividends? So that to sell shares they have got
to prove that the ore is there, second that it is in
sufficient quantities, third in sufficient quality,
and fourth that after putting in quarter of a billion
dollars, that they will be able to run that mine at
a sufficient profit — not the 1% to which
Mr. Hickman referred on Friday; but ... around
$10 million a year since they have to sell the
shares, and that they cannot do unless they can
show the public that there is a good chance of
making a profit.
Now the next question is whether there is a
way in which they can hide that profit in such a
way that when the Newfoundland government
gets 5% of the net profit, that that 5% won't give
them any money. Can they hide it in such a way
that when the tax assessor starts to collect income
tax, their profits will be so hidden that he cannot
collect income tax from them? Well, maybe so.
It would not be the first time it was done, but on
that point we have this reassuring fact, that part
of the company will be operating in Quebec, and
the Government of Quebec ... is well used to
dealing with great corporations. Not only that,
but you have the probability of the federal
government of Canada itself needing to know
what profits that corporation makes. All right.
Cannot the Government of Newfoundland,
whether it be the present Commission, or responsible government, or confederation,
could not
Major Cashin for example, if he were Minister of
514 NATIONAL CONVENTION April 1947
Finance, from the knowledge he could get from
the Government of Quebec and the Dominion of
Canada, easily find out ... what profits that company is making? Have they not got
to declare
dividends? Won't the shareholders demand
dividends? I am doubtful if they can hide them. I
imagine Major Cashin would be the first to tell
me that these shares will be quoted on the stock
exchange, and will be as familiar to the investing
public as United States Steel or any other great
corporation The full spotlight of publicity will
be playing on that company, because there will
be maybe tens of thousands, or maybe hundreds
of thousands of shareholders wanting to know
what profits they are making. Well, if everyone
knows it, surely the Government of Newfoundland will know what profits they are
making....
There is one thing that gives me worry. It has
not come up today or at any time. Is there any
guarantee that this town of 35,000 souls will be
on Newfoundland soil? Two mines will be
worked together, it is all one mine. If you can
work those two mines as one mine, then certainly
you can have the town on the Quebec side as
easily as on the Newfoundland side. Apart from
the 15 cents per horsepower royalty, if we can get
the town in Newfoundland and not in Canada,
and could increase the royalty per horsepower
above 15 cents, then it seems to me it would be a
very fine deal for Newfoundland.
Somebody said here that I was trying for the
sake of confederation to make out that Newfoundland did not have a good future. In
reply I
will say this, that on account of a number of
things — the fact that this man Timmins is associated with Hanna —l I have heard of
him, he
made and unmade presidents in the United States
— you have these two very big men — for that
reason and for the reason that the iron mines of
the United States are running out, and for the
reason it is going to take one quarter of a billion
dollars to develop, I am convinced that this mine
in Labrador is one of the biggest things that ever
struck this country — utterly monumental. There
is another thing about it. It is a local company, a
Newfoundland company, registered in Newfoundland subject to the laws of Newfoundland.
They are going to tie up in Newfoundland $125
million. That $125 million will not be here in
bonds, shares, cash or bank notes. They cannot
slip it across the border. That $125 million will
be down there in the form of a railway, a town of
35,000 (almost as big as St. John's), many buildings and mining machinery — a property
making
four or five of Bell Island. is not that some
security to Newfoundland? Some security to the
Government of Newfoundland? We have them
by the short hair if they tie up $125 million in our
territory. I do not see how they can crawl out
without paying the taxes.
There is another side to it. I was wondering
whether we could get back the water-powers.
Suppose you had an elected parliament, whether
under confederation or on our own, that House of
Assembly is sovereign and supreme; suppose this
country was not satisfied with the Bowater contract, or if you like AND, or Bell island
or
Buchans; suppose they felt the government was
not getting enough taxes out of those corporations; am I far wrong when I say what
parliament
makes it can unmake? What it does today it can
undo tomorrow? Its law is supreme when it writes
it, and passes it in the regular way. it could, if it
liked, nationalise Bowaters tomorrow, buy them
out and make them a government proposition in
the same way that the government of England is
taking over the mines in England.
Mr. Higgins With this exception. I would say.
It is true what parliament makes it can unmake,
but we must regard this as a binding agreement.
If we did what you suggest, it would be extraordinary if people would do business
with us again.
Mr. Smallwood I am talking of the ability of
parliament to do it. Naturally they would have to
consider the consequences that would follow
from its action. If it is true of Bowaters, AND,
Buchans, St. Lawrence and Bell island, is it not
also true of Labrador? Would not that company
in Labrador have that hanging over their heads
— especially if I have anything to do with the
future government of Newfoundland — a warning to be on their best behaviour, with
the possibility that Newfoundland might step in? They
may have more reason to be scared than you are
willing to admit. I am fed up with the way this
country has handled those foreign corporations.
What this Convention has to decide is this:
what are the chances of Newfoundland people
having a decent living? What are the chances of
the Government of Newfoundland balancing its
budget? As far as this report is concemed we have
April 1947 NATIONAL CONVENTION 515
to consider it in the light of these things. Regardless of our desire to knock the
Commission of
Government, what we have to decide is what
bearing will this Mining and Exploration Company have on the future ability of this
country, its
people and its government, to be self-supporting?
Personally, I am quite satisfied. I have my
doubts about the fishery, doubts about other activities. But so far as Labrador is
concerned, I say
cheerfully and willingly that this, as Major
Cashin says, is the biggest long-range thing that
has come to this country: so big that we get lost
in the details of these acts. Let us not get lost in
the details. If this company will provide a town
of 35,000, its wages will provide the future
government of Newfoundland with an amount of
maybe 1.5 million a year.
Mr. Higgins Before we go any further on the
matter, I would like to draw your attention to the
memorandum which was prepared by Mr. Eric
Cook. As a result of a meeting which we had, it
was suggested that we ask Mr. Cook to prepare a
memorandum of the situation as he saw it.
Mr. Cook is solicitor for the Labrador Mining
and Exploration Company.
[The memorandum was read[1]]
Mr. Higgins That figure of $125 million
Mr. Cook assures me, will be for the railway and
the mine in Newfoundland. He is satisfied that is
the figure that will be spent in Newfoundland
alone.
With respect to the income tax, you have
before you the Income Tax Consolidation Act,
1944. When Mr. Allen was before the Committee, we asked what the position would be
if the
Labrador Mining and Exploration Company was
controlled by a parent company, which was a
steel company, and they were selling ore to the
steel company at a price lower than the regular
price. Mr. Allen's answer was that if returns
came in with the price of ore marked $4 a ton and
the real price was $6. he might not know it, but
he would send it to Mr. Claude Howse, who
would give him the proper price. Mr. Howse says
they get weekly prices. He says if the ore market
was artifically depressed, if all the big companies
got together and depressed prices, nothing could
be done about it; not only Newfoundland, but no
other authority could do anything about it. There
would be no reason for them to pay taxes outside
Newfoundland rather than pay Newfoundland,
because Newfoundland taxes are less than
Canadian corporation taxes.... His point was
there would be no reason for the companies to
diddle the returns; they would have to pay bigger
profit or income tax outside Newfoundland than
inside. He has the right, if they put in returns he
considers not fair, when dealing with an interlocking company, to go into the matter
and determine what the fair amount is. Our paragraph
commenting on the suggestion there might be
depreciation value is not critically correct from
the explanation we have now. I believe most of
us are satisfied, we have to admit that now....
Mr. Fudge I am not going to say much in can
nectin with the Mining Report because I do not
know too much about acts.... As far as I am
concerned, I think we have gotten a raw deal.
Mr. Miller I am open to convincing on the
Labrador deal. I would like to make certain it is
not a raw deal. I rather resent the approach made
to this matter by some speakers. Some people
went so far as to say that it was not our business
whether we got a good deal or a bad deal. Now
that's wild. Newfoundland's present position is
probably entirely due to the fact that in the past
we did not get deals that were so good. We now
come to a stage today where we made comparisons, and we have worked a lot on this
and
we are still open to conviction. Some speakers do
not want to hear it. Why? They argue that it is not
in our economic interest. Can you convince me
that if we get 15 cents per horsepower it is as good
as $1 per horsepower? We might have one million horsepower. I can't see why we refuse
to
agree or disagree after we consider it, but you
actually refuse to consider the information that
we humbly place at your disposal. It is immaterial
to me, but we put it to you as fairly and plainly as
possible. I would prefer not to deal with it here,
and I still think it can be dealt with better out of
here, but I am open to conviction and I hope there
are many others too. We have been a long time
on this Mining Report and a lot of people
wondered what we were doing. Some people said
we were not doing very much, and sometimes I
felt the same, because we could not get all we
wanted and if at the last minute something shows
up and we have not formed an opinion on it we
waive the right to go thoroughly into it, but that
516 NATIONAL CONVENTION April 1947
right is not altogether free here this afternoon and
that I resent.
In our Mining Committee investigations, we
picked up material everywhere. Some of it was
authentic, and some was fairy tales. Some that
was given as authentic by responsible authorities,
was retracted as late as 12 o'clock today. Can we,
in view of all this, make up our minds and be
straight about it? We looked back to the year
books and other books to find the history of the
iron ore industry and the steel industry, which we
know nothing about in this country. We know
plenty about the iron ore industry and the niggardly manner in which it has been developed
here, and we find that iron ore mines never pay.
One man said, "We lost 30 cents a ton last year
due to a low dollar rate and 30 cents a ton because
we wrote a contract and the sterling exchange
failed." 60 cents a ton on their ore production, and
they go right on operating! They don't hesitate.
What is the answer? The answer is that they feed
the raw material to the company away, and the
steel company makes a profit. That is a mean
position for Newfoundland to be in. If it can be
avoided in a second instance, it is well worth
consideration for a few minutes today. I don't
want to force you into it, but I do point out that
such is the position, and we may have a repetition
of it again. True, there is everything in the act to
protect us in the net profits and more in the
income tax act, but that company has a right to
sell out to a steel company. and after that our
trouble begins.
We had a question of 10 cents per ton, which
came up before the government some years ago
and was written into the original agreement. The
company argued that they could not operate if
they had to pay 10 cents a ton, but among the
information that we presented to you on page 16,
there is a little tabulation of figures... Let's not
forget that this Labrador Mining and Exploration
Co. could not pay us 10 cents a ton, and let's
compare their operations with present prices in
the Michigan area. We find there is one operation, taxes paid the government, 24 cents
per ton.
That's the Gogebic, it's underground mining and
we believe the ore content would be about the
same percentage. You have taxes of 24 cents per
ton. You have 33.5 cents per ton royalty.... In the
town you have federal income and excess profits
to the extent of 15 cents a ton. If you add all these
up you will find that that mine pays out as royalty,
as these figures add up, 69 cents per ton.... We
find that the Michigan operation pays 69 cents
per ton, and the company coming in here is
flabbergasted at the idea of paying 10 cents a ton.
Has anyone got the answer to that? Give me the
answer to that, and I will sit down quite contentedly. But the information came at
a late date on
a lot of these items, and we have not been able to
cover it thoroughly or give you our definite
opinion, consequently we have the right of
opinion, and we hold that right, and present die
record to you in that same manner.
Mr. Hollett I don't intend to say much on this.
but I am entirely in agreement with Mr. Miller. I
am thoroughly convinced that Newfoundland as
a country has got a raw deal in this 1944 act, and
I can't understand any man trying to praise it and
saying we got the best act in the world.
Mr. Hollett I don't know. You might not have
been here. The 1938 act does not look so bad.
There were some chances for the treasury to
obtain some income from it, and after all that's
the only direct value to the treasury — the royalties and the income tax which can
be obtained
from the operations. Under this 1944 act, if you
run through it carefully, you will find that by the
time the company has taken out all the things
which they may take out, it is practically impossible for them to make any profit
whatever, and
they will be like the mine in the Michigan area.
They have been operating at a considerable loss
but still are in operation, and I am quite sure that
all these mines are under the contract of certain
steel manufacturing companies. I am not convinced yet that this company in Labrador
is not
working in conjunction with steel manufacturers,
because I can't understand anyone spending
$125 million without having made some
provision for the sale of their ore, and I think the
steel companies are in league with them on this
deal. It is pointed out that we will have a lot of
men down there in that visionary town. I fail to
see where, in this country, they are going to get
many miners. We have some in Bell Island and
some in Buchans, but no others. If we put them
in Labrador you have to deplete the manpower of
these other places, and you can't expect the men
to leave Bell Island or Buchans to go down to the
Labrador wilderness, so where is the manpower
April 1947 NATIONAL CONVENTION 517
coming from? Certainly not from Newfoundland
in any numbers, so where will we get any revenue
from the work that will be supplied there? Under
the old act we would get 10 cents per ton, and I
have yet to see who could advise that that 10 cents
per ton be taken off.... Can anybody here tell me
how iron ore mines in Michigan in 1944, when
the war was at its height, how these mines could
operate at a loss and continue operating?
Mr. Smallwood The same as our fish merchants
do. They always operate at a loss.
Mr. Hollett Yes, I know all about that. I know a
good many fish merchants who had nothing when
they started and have a lot now. I would like to
remind some of my friends here that in Quebec
the royalty paid is per horsepower.
Mr. Hollett Yes, $1 per horsepower in Quebec,
and why in Newfoundland should we say that 15
cents is a very good figure? I can't understand it.
Application has been made for the export of
water-power, and I am of the opinion that the
country, or the government, should not, or rather
that before any such license is granted, the whole
matter of royalties, both on ore and on waterpower should be again raised. I would
almost be
prepared to make a motion to this effect. I can see
that the revenue of this country cannot be enhanced in the next 25 years, either by
income,
royalties or labour, through the 1944 act.
Mr. Newell ....We are a country with certain
minerals, and we require employment for a certain number of men, and we think that's
a
desirable end. On the other hand there is a company which has capital which it wishes
to invest,
solely that it may make profits. The two meet and
do a bit of bargaining. The country is not concerned about the interests of the company,
and
neither is the company concerned about the
country. They are both out to make the hardest
bargain. It looks to me as if we have been driven
the hardest bargain...
[The committee rose and reported progress and the Convention adjourned]
